Benefits of Supplier Finance

EXTEND PAYMENT TERMS (DPO)

By increasing the days payable outstanding (DPO) — the number of days required to pay suppliers for the work they have performed — buyers are able to keep more liquidity on-hand, for a longer duration.

Finance departments, treasurers, and investors typically appreciate this the most.

OFFER EARLY PAYMENT

Suppliers deeply value this feature. They face constant cash flow shortages while waiting for large invoices to be paid, and the stakes are often a matter of life-and-death. Offering early payment options fills in the gaps during these lull periods and prevents supply chain disruptions.

REDUCE INTERRUPTIONS

Any small gains made by squeezing discounts out of your suppliers and bullying them with harsh payment terms are greatly outweighed by the savings made via stability in the supply chain.

As your purchasing department can attest to, finding an ideal supplier is no small task, and the cost of replacing them is enormous. Why go through that if you don’t have to?

KEEP LIQUIDITY ON-HAND

Treasurers and investors are always concerned with a company’s liquidity.

Supply chain finance helps keep liquidity on hand by extending the number of days payable outstanding (DPO), and also by committing funding to suppliers in real-time. This means that accounts payable are never classified as financial debt.

OPTIMIZE WORKING CAPITAL

Finding the “sweet spot” of working capital is a tricky matter for any organization. Achieving a low level of positive working capital is often the ideal scenario, but figuring out how to get there is another matter altogether.

ALIGN FINANCE & PURCHASING

You might not realize it, but your finance and purchasing departments might be making life unnecessarily difficult for one another.

Supply chain finance fixes this problem by striking a balance between liquidity concerns and supply chain stability. With a small investment of time and zero additional costs, buyers can get make sure that all departments are working towards a common goal.